Behavioral Decision Theory and Good Decision Making

Abstract

The final chapter of this book presents a critical examination of the psychological models of multi-attribute decision-making, findings obtained from them, and rational decision-making and considers what constitutes a “good decision.” First, a basic framework for ordinal utility theory based on Takemura (2011a, b) is presented as normative analysis and is examined in view of rationality. By subsequently defining the version of ordinal utility theory expanded to multi-attribute decision-making, we will re-interpret the rationality of multi-attribute decision-making based on Arrow's general possibility theorem. Re-interpretation of the general possibility theorem of Arrow (1951) suggests that the rational multi-attribute decision-making defined here could not be performed with the exception of one-dimensional decision-making based only on specific attributes. We descriptively analyze people’s multi-attribute decision-making to demonstrate, based on the psychological model of decision-making, the tendency of people to use one-dimensional decision-making to solve issues of multi-attribute decision-making. Finally, prescriptive examinations of multi-attribute decision-making are performed to support the argument that decision making from a pluralistic perspective results in a “good decision” even though one-dimensional decision-making should be avoided and even though rationality in the above sense might not be satisfied, particularly in important decision-making.

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